The optimistic market sentiment that has driven stocks higher in recent weeks took a sudden turn, causing Asian markets to drift downward on Wednesday. Traders, nursing losses, are now looking for cues from Federal Reserve Chair Jerome Powell’s testimony before Congress.
Powell is expected to maintain a relatively hawkish stance, reinforcing that policymakers are not rushing to cut interest rates. The uncertainty surrounding rate policy was further heightened by mixed U.S. economic data on Tuesday, showing slower services growth but a surge in new goods orders.
The overnight surges in gold and bitcoin to record peaks highlight investor discomfort with inflation and debt, leading them to seek refuge in assets with limited supply. Central banks are also increasingly turning to gold, with analysts noting a near tripling of central banks’ share of world gold demand to 25-30%.
Spot gold reached as high as $2,141 an ounce on Tuesday, while bitcoin broke above $69,000 before retracting below $60,000.
Bank of America attributes the surge in gold and bitcoin to concerns about the U.S. national debt rising by $1 trillion every 100 days, driving investors into “debt debasement” trades.
In Asia, investors remained cautious about exposure to the Chinese market despite the country’s latest growth and policy plans. Hong Kong stocks edged higher, while mainland stocks saw a slight decline.
Australian economic growth slowed in the December quarter, reinforcing expectations of a potential interest rate cut in the country.
Results from Republican presidential nominating contests showed Donald Trump overcoming the challenge from Nikki Haley and progressing to a rematch with Joe Biden.
Euro zone January retail sales figures are expected, with economists anticipating a steady reading following a sharp decline in December. The market awaits these developments to gauge the future direction of global markets.
